What is Trade Credit in Retail? Explained

Trade credit in the retail industry is a financial arrangement where a retailer is allowed to purchase goods or services from a supplier and pay for them at a later date, typically after an agreed-upon period. This arrangement provides retailers with a short-term financing option, enabling them to stock inventory or meet operational needs without an immediate cash outlay. Trade credit terms vary and may include net payment periods like 30, 60, or 90 days. Effectively managing trade credit is crucial for maintaining healthy supplier relationships and supporting the ongoing financial health of the retail business.